Environment

3 Ways to Make Investment Decisions Without Compromising Values

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By Aaron Fairchild

I recently spent a couple of days at SOCAP18. After the conference, I had the opportunity to screen a soon-to-be-released Australian documentary called, 2040. 2040 is a beautiful “future-fit”, utopian depiction of a potential future made possible by incorporating carbon drawdown methods and technologies. 
 
The week before the screening a new environmental philosopher friend shared a concept she has written about extensively — the Precautionary PrincipleShe explained this by saying, “One can’t use uncertainty as a justification for inaction. One must use precaution to mitigate harmful outcomes even in the face of uncertainty.
 
Appling this to positive impact investors could translate to: “Investors and their financial fiduciaries can’t use financial uncertainty as a justification for inaction. Given the urgency of our social and environmental challenges, investors must use precaution to mitigate harmful financial outcomes — And still identify ways to invest in positive social and environmental opportunities even in the face of financial uncertainty.”
 
Unfortunately, in the face of our pressing social and environmental problems, the Precautionary Principle is often used as a reason not to invest in opportunities that generate positive impact outcomes. Even given our good intentions, the traditional structures of finance don’t legally allow moral social and environmental convictions to negatively influence financial outcomes. If the financial outcome is uncertain, but the social and environmental outcomes are clear and measurable — the existing legal frameworks and institutional structures justify inaction in the face of uncertainty.
 
As my mental turntable plays the paradoxical precautionary blues, I see images of the amazing people in the theater moving to a rhythm of positive change, but are we a little off the beat? 
 
How many times have you heard, “In order to attract more capital, the social and environmental enterprise must prove its ability to create market-rate returns. We need proven strategies.”? This thinking may lead to a slip-and-slide of marginalized outcomes in the pursuit of “market-rate” returns. Furthermore, the Precautionary Principle can create a disincentive to invest in positive social and environmental outcomes in uncertain market cycles or in investments labeled “concessionary.” In uncertain markets or uncertain categories, investors may justify putting the pursuit of positive outcomes on the shelf in favor of “proven” and more certain downside protection investment strategies.
 
According to Paul Hawken in the film 2040, 80% of the world’s agriculture is grown by small farm holders. However, in 2018 small farm holder investments are flat to down. Unfortunately, this is not an anomaly. Small to medium enterprise investments are flat to down, and renewable energy investments globally are flat to down as well. I recently learned of these alarming statistics on the Impact Alpha podcast, Getting to Yes. The decline observed in this podcast may be a result of investor’s growing uncertainty in the financial markets. Are we employing the Precautionary Principle? This may forecast a potential disturbing trend for urgently-needed investments in social and environmental solutions as the US economy advances into a market cycle already long in the tooth.
 
Understanding how we may be employing the Precautionary Principle helps clarify that even as we face urgent need to invest in social and environmental solutions, our desire for positive social and environmental outcomes often are left waiting on the side in the face of financial uncertainty. It is a difficult paradoxical dance to pull off. If true, I have three recommendations:

  1. Engage and collaborate with the impact entrepreneurs.When the social and environmental outcomes are clear, measurable and convincing, but the financial outcomes are uncertain — engage! Offer to work directly with the social entrepreneur or fund manager to help craft precautionary strategies within the investment opportunity that mitigate potentially harmful financial outcomes. Assess the investment opportunity thoroughly, do your due diligence and collaborate to mitigate harmful financial performance while maintaining the positive social and environmental outcomes. 

  2. Change the legal framework of professional financial organizations to align to the Benefit Corporation structure. Benefit Corporations structurally embed expanded fiduciary obligations to include social and environmental considerations.

  3. Work with a separate advisory committee or due diligence team. As an individual investor that is not constrained by the fiduciary obligations of professional wealth management, consider working with a separate advisory committee or due diligence team or conduct personal due diligence on impact investments.

 
After the 2040 film screening, I left the theater in a crowd full of optimism and inspiration. Even with the Precautionary Principle burrowed deep within the financial structures and investment psyche of America, I am optimistic that by becoming more aware of how and why we make decisions— and the structures within which we make them— we will continue to learn how to better align capital to the future we envision. 

The Transformative Power of Frameworks

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What impact could we have if we were all just a bunch of tree huggers united under a green canopy? Our logo is definitely symbolic of the work that we are doing to change the course of climate change - and certainly everyone knows that we have sang our share of kumbaya - but it's the fast, hard data that delivers our projects and helps us work toward improvement at Green Canopy.

Decision making and benchmarking frameworks are integral to Green Canopy’s operations. Our acquisitions team uses a data driven framework and metrics to identify and purchase attractive development properties. Our project managers use a framework for guiding construction related decisions from start to finish. The reporting outputs are used to inform and manage future acquisitions and projects.

These carefully crafted systems support us in driving toward consistent execution and continuous improvements. We learn from the successes and failures of our decisions by establishing baseline metrics and measuring and reporting against them. This ultimately makes Green Canopy a better homebuilder. And importantly, creates a stronger and more resilient company, reduces risk for our debt fund members and builds a more valuable brand for shareholders.

Investors face similar challenges, especially those pursuing positive social and environmental impacts alongside financial performance. Without a guiding framework, impact investors are left to untangle a confusing mix of information and options. An impact framework can be a transformative tool enabling investors to move beyond intuitive guesswork toward more systematic and objective decision making.  

We hope you will join us in attending an event, Impact Investing with Purpose, being hosted by The CAPROCK Group and SNW Asset Management on Tuesday, October 20th, 6 to 8 PM at Seattle Impact HUB. Green Canopy board member Kyle Mylius will moderate a panel exploring the evolution and use of impact investing frameworks and metrics. Panelist Luni Libes, a familiar face to many of you from Fledge and Pinchot University, will offer insights into The Pinchot Impact Index, the subject of Luni’s recently published book. The event will close with a preview of CAPROCK’s iPAR impact investment framework and evaluation platform.

Impact Alignment: Where Impact Product Meets Impact Buyers

Contributed by: Aaron Fairchild, CEO of Green Canopy, Inc.

I have often cited Daniel Goleman to explain a consumer’s desire to make an impact with his or her invested dollar. In Ecological Intelligence, Goleman explains that consumers will always buy what they perceive to be a less toxic or more environmentally friendly product given price parity with a competing product. While the consumer may not be buying the perceived “better” product to make a positive impact in the world, they are likely buying it because they view the product healthier or better for their family. 

This consumer behavior pattern offers a direct analogy for financial investors. It goes without saying that investors invest capital to generate a return. If an investor can invest in an opportunity that generates a similar risk-adjusted rate of return to competing investment opportunities yet the investment will also deliver outcomes that better align with their values, then the investor will likely choose to invest their capital in such a value-aligned opportunity. 

Enter Green Canopy. Our mission is transformational; our company was deliberately created with the mission to inspire resource efficiency in residential markets. We have two impact product offerings for consumers to buy.

Our primary impact product is our homes. We build homes that are more environmentally sustainable than what is required by city code and  have third party  audits  verifying our homes meet or exceed a local or national green building standard. In other words, a Green Canopy home is healthier for the planet, consumes less energy to operate (we guarantee that), and is simply a better home than the comparable code-built home. The kicker: we price our homes for sale on par with other homes on the market. We have to price our homes competitively with other homes because if we don’t, buyers would choose to acquire the less expensive yet comparably located and sized home. So buyers of our homes acquire a Green Canopy home at a competitive price that delivers outcomes that align with their needs and values. 

Our second impact product is our real estate fund offerings. We currently manage two debt funds that generate competitive returns for investors. If it were not for these funds, we would not have enough debt financing to build more environmentally sustainable homes at our current scale. Investors in these funds buy membership units that are designed to generate competitive rates of return and deliver outcomes that align with their values. 

I believe the United States has entered a relatively new era where the general market is looking for values-aligned solutions. I witness this daily in both of our product offerings. However, most consumers and investors remain price sensitive and will continue to be so. This is where many people believe the government and foundations can play a role. However, I don’t believe it is incumbent on the government or others to subsidize product offerings, or for that matter the market to simply accept the market-price mismatch. 

Entrepreneurs innovate. The role of being an entrepreneur is to figure out how to bring new product to market in such a way that the market is willing to pay for it. Government incentives and infrastructure are helpful catalysts and support structures for market change. But the role of efficiently bringing new product to market is ultimately the role of entre- and intra-preneurs. 

Additionally, foundations, the government and other mission-driven sources of capital can aid in providing lower cost of capital to kick-start product offerings and help stimulate demand (think of the Bullitt Center or the ZHome development). However, values alignment should not be seen as an impediment to bringing socially and environmentally impactful product offerings to market—it should be used as a competitive advantage. Sound business people focused on values-based product offerings will continue to innovate within the cost/price constraints of the market and ultimately bring more and more highly sought after product to meet consumer demand. Impact alignment and the balance between supply and demand are really just a matter of time and innovation.

Is your Dream Home a Green Home? The Challenges of First Time Home Buying

Leah Missik - The new Director of Built Green talks to happy hour guests about the Built Green program.

Leah Missik - The new Director of Built Green talks to happy hour guests about the Built Green program.

Last month we had the honor of hosting Greendrinks with a fantastic group of organizations. The Youngstown Cultural Arts center was buzzing with folks from Built Green, Sustainable Seattle, Green Canopy and the Washington State Housing Finance Commission; all there to answer one question for the happy hour attendees - "How can we make green homes more accessible to first-time homebuyers?"

Promoting green building in the retail, real estate market is a paradigm shift in the way we have traditionally shown and sold homes in the past. Value in real estate has always been determined by location, price, amenities, neighborhood, school districts, etc. with little thought given to long term investment in things like utility bills or walkability.  However - as we see the Millennial generation step into the homebuying arena - a generation known for their values-based consumerism -  we can and should expect these individuals to be more interested in long term savings from resource conservation, healthier and local materials that benefit the local economy, and access to amenities in walkable locations that will keep them out of their car. It's not just the Millennials making these decisions though. Today, the typical homebuyer is tech-savvy and non-traditional. They tend to research more or their own and, while decisions still weigh heavily toward cost and location, energy efficiency is topping the charts on the "Must Haves" list for new buyers.

That being said - there are still not a lot of resources to help first time buyers get exactly what they want from the traditional real estate market - and certainly not many incentives to help aid in that decision to go green. Speaking from my own home buying experience, you tend to throw your values out the window when things start to get competitive!

Greendrinks was a perfect opportunity to explore the ideas and programs that are currently at the intersection of the market and values. Folks left the following comments on our interactive ideas board - and conversations circled many of these topics and solutions all evening.

  • More education - many people do not know where to start when it comes to homebuying for the first time. Green homes can quickly become less of a priority as bidding wars heat up the market and first time buyers are forced to keep searching when product is scarce.

  • Incentivize green building - making it worthwhile for builders to actually build green product is a huge part of the equation. Programs like WSHFC's Energy Trust and Built Green - make it easier for builders to finance projects and adapt green building practices that make an impact in our market.

  • Incentivize green home purchases - Green mortgage loans and new products like WSHFC's Energy Spark program are paving the way for buyers to experience real financial relief on their mortgages for purchasing a green home. Additionally, programs like Green Canopy's Energy Performance Guarantee give buyers the peace of mind that their home will perform as it was modeled. This 3 year guarantee means the builder will pay any utility bill that exceeds the amount modeled in the Energy Performance Score.

As mentioned above - the Greendrinks event was an opportunity to talk about a new program from Washington State Housing Finance Commission that was launched just this month. We were especially excited to be alongside WSFC as they revealed Energy Spark - a program that works hand in hand with their down payment assistance program for first time buyers. This incentive comes in the form of an interest rate reduction for mortgages on energy efficient homes. You can learn more about it in this short clip from Kiro News. 

Fresh Thinking From NW EcoBuild Community

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By Caitlin Hoeberlein and Krystal Meiners

Recently you may have seen several of our Green Canopy project managers and a few of our support staff breaking bread with the rest of the greenbuild community at this year’s NW Ecobuilding Retreat. This is one, special event that gets our construction team worked up and inspired by the big fresh thinking of our peers. Out of all of the conferences that we have attended and supported this season – this one is especially aligned with what we love about our work and the future of our work in other NW markets

Nine of our team members attended this gathering and here is what inspired them.

  1. Green Appraisal – Thanks for the Green Genius name-drop Fiona! This is one topic that we have really hit home with in real estate education, and a topic that builders battle constantly when trying to encourage change in the valuation of green building. Like this article from Builder Online recently stated “Many builders are fed up with a financing system that doesn’t put enough value on sustainable features and the savings they yield for homeowners.” The fact is that buyers who purchase energy efficient homes have a lower default rate – because these homes simply cost less to own! A point that we often drive home in our Green Genius classes. Change comes from within and we are especially thrilled to see the number of appraisers that frequent our classes.

  2. Reclaimed Materials – The topic of deconstruction and reclaimed materials is one that Green Canopy is head over heels for at the moment – so don’t be surprised if you see it mentioned here again! The case study HOME reclaimed, presented by Ryan Mankoski was excellent. Ninebark Design Build is doing some stand-up work and also recently won the Built Green Hammer Award for Project of the Year for this re-envisioned, reclaimed Tudor, also mentioned here on Curbed Seattle.

  3. Greenfire Campus: What DON’T we love about the Greenfire Campus? The alternative green building strategies like cisterns and geothermal energy is pretty amazing and a cool addition to the Ballard neighborhood. This project was brought to our attention a while back when Redfin asked for our help in teaching a “How to Buy a Green Home” class for their buyer clients. Redfin Builder Services represents the Greenfire and Solo Loft Developers and have had huge success marketing this project and its cool resource efficiency strategies. Well done!


We really enjoyed the energy of the event and the community of smart, greenbuilding pros working together to raise the bar and impact big change in the Pacific Northwest. Can’t wait until next year!

Green Canopy Branches Out

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When the founders of Green Canopy first launched a homebuilding business in 2009 in Seattle, the temperature of the room was tepid to say the least. Presenting a real estate venture in the middle of a recession doesn’t exactly make you look smart, even if you can say it with a straight face. But, what may have seemed like a huge risk then, was also humbly presented as having its rewards. The rewards were transformational, the cause was inspirational and the drive to create a deliberate and intentional homebuilding business that could move markets and protect mountains – somehow made it worth the risk.

Green Canopy recently closed on our first Portland project in the Arbor Lodge neighborhood of North Portland and we are incredibly excited for our expansion. We will be launching a Portland-centric real estate debt fund in the coming months so stay tuned. This is our climate change solution and we are making it happen! You can read more about our Portland Expansion by downloading our official press release here.

Green Canopy Repurpose: The Art of Deconstruction

 “... Some homes are worth saving. Some aren't.”
-Bradly Gunn, The Seattle Demo Project 

Contributed by Caitlin Hoeberlein, Project Engineer for Spec Construction

At Green Canopy, we are committed to resource efficiency. For us, this goes beyond installing solar panels and thicker insulation. When the structure of an existing home is unsalvageable, we are in a rare position to be able to decide how to dismantle the home, and how those resources are re-used and re-purposed. This means that we have the ability to save the embodied energy of the existing structure--talk about resource efficiency! 

We aren’t the only ones who are inspired by deconstruction. Bradly Gunn is a local Seattle painter and architect who started the Seattle Demo Project, an art and architectural program documenting and memorialising soon-to-be demolished homes in Seattle. According to Gunn, “the Seattle Demo Project is focused on bringing light to a relatively misunderstood or ignored facet of Seattle’s urban condition. We want to activate soon-to-be-demolished structures and provide an opportunity to learn, explore, and engage the community one last time before they are gone.” 

As a builder, we hear a lot of criticism against development. Gunn claims he was in the “anti-development camp” just a few years ago. He wanted to keep his neighborhood the way it was, but soon realized that “some homes are worth saving. Some aren’t.” When he found out that more than one home per day was being torn down in Seattle, he realized that his art could shed light on this staggering statistic by converting these homes, a formerly untapped resource, into an artistic and educational opportunity. “Houses are an art medium of a very different scale, that only a handful of artists have gotten to play with,” he says. As a medium, there’s a lot of potential and many stories to uncover. 

Unlike our team here at Green Canopy, Gunn didn’t come to deconstruction from a sustainability standpoint. He was not interested in the repurpose value of the materials, but rather the value that documenting these projects could have for communities, architects and students. He envisioned transforming these run-down homes into a touchpoint for neighbors to learn about architecture and development in an open and engaging way, by abstracting it. “When it’s not the house or the walls, it becomes another story,” says Gunn. He sees his work as an avenue for architects to reexamine failed systems, and for students to gain firsthand experience in the field. He likens student involvement in his project to doctors studying cadavers--documenting the deterioration of a house provides invaluable lessons for those designing new homes.  

When the structure of the existing home is unsalvageable, Green Canopy is committing to deconstructing instead demolishing whenever possible, saving as much embodied energy as we can. We are happy to support Gunn in his artistic and educational quest. Gunn is currently documenting two of our deconstruction projects in Ballard and West Seattle: Gertrude and Aura. We are deconstructing these homes by hand, and will reuse and recycle 100% of what we dismantle. Together, we can build a new, sustainable future by learning from and respecting the past.  

You can learn more about the Seattle Demo Project here, and about Green Canopy RePurpose by contacting Justin Hooks. Green Canopy is soon to offer our Green Canopy RePurpose services to other builders. Stay tuned! 

To hear more about our reuse and the deconstruction process, join us for this year’s Green Genius Awards and the Built Green Conference on September 18th. Justin Hooks will be a session speaker and Green Canopy is the Reception Sponsor. Click here for more info about the conference.

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